Appealing your property taxes; verify licenses of companies soliciting you

by Dan Krell © 2010

Since the decline of the housing market, many home owners have appealed their property tax assessments. The appeals process is straightforward and is laid out on the Assessments and Taxation website: www.dat.state.md.us/sdatweb/appeal.html.

The appeal process can be broken down in several discrete steps. The important thing to keep in mind is the filing deadlines; however, if you miss one deadline you can file during the subsequent cycle.

There are three times you can file an appeal; upon re-assessment; upon purchase; and you can petition for a review. Since homes are assessed every three years, you can file an appeal within 45 days of receiving the assessment notice. If you’re a new home owner, you have 60 days from the day you take title to file your appeal, but only if you settle between January 1st and July 1st. If you miss these deadlines or you feel that conditions have changed such that your home value has decreased between assessments, you can file a petition for a review before January 1st.

To be most effective authorities recommend that you: stay focused on what affects your property value; provide reasoning why the “Total New Market Value” is not accurate; point out errors on the assessment worksheet and/or in the description of the home; support your appeal with recent sales comparables.

The first step of the appeals process is called the “Supervisor Level.” This is where you will meet with a local level official to present your case. It is recommended that you obtain local sales information to support your case, which can be obtained from various sources such as (but not limited to) a library, public records, or a local real estate agent. For a nominal fee, the assessment office offers worksheets listing comparable properties. At this level, you basically present your evidence as to why the department’s assessment is inaccurate.

If you’re unsatisfied with the initial decision, step two is to file an appeal to the Property Tax Appeal Board. The appeal to the PTAB must be filed within 30 days of the final notice from the Supervisor of Assessments.

If the PTAB decision does not satisfy you, step three is taking your appeal to the Maryland Tax Court. If you’re not content with the MTC’s decision, you can file further appeals; however further appeals must be in the judiciary system (and it is recommended you hire an attorney).

Even though the property tax appeals process is straight forward, there are companies that will assist you in your tax assessment appeal for an upfront fee. Although the tax assessment appeals industry has been around for many years, it has mostly been focused on more complicated and business related tax issues. Some of the tax appeal business newcomers have organized in the last couple years and target homeowners; some operate through recruited “affiliates” who make referrals for a fee. Furthermore, some of these businesses lack appropriate licenses and offer nothing more than information that is already publicly available.

Many homeowners successfully undertake the appeals process on their own; however if you choose to employ someone to assist you, ask questions about their business as well as check if they’re licensed and reputable. Licensing can be verified through the Maryland Department of Labor, Licensing and Regulation; other concerns can be cleared through the Office of Consumer Protection.

This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of July 26, 2010. Using this article without permission is a violation of copyright laws. Copyright © 2010 Dan Krell.

Hiring family to sell your home: A relative experience

by Dan Krell © 2010

The thought of hiring a real estate agent can be unnerving, let alone the fact that you might have to consider hiring a family member to act as your listing agent. For some, familial pressure to hire a relative could be intense and may be a potential source of conflict; while for others, no one but “Cousin Jerry” would be considered to list their home.

Some people are ambivalent about hiring relatives for any service, let alone for a real estate transaction; they believe that mixing business with family matters is not a good idea. Besides asserting discretion over their business and financial dealings, these folks know that family ties and relationships could be at stake if the sale doesn’t go as expected. They do not want family matters or guilt to interfere with business decisions, especially if they feel a need to fire their real estate agent or even seek recourse.

Still many people do not have a second thought about hiring their “Cousin Jerry” as their listing agent. Besides feeling an expectation to do so, some people cite a comfort level and trust that exists from their long time relationship (which can be hard to come by when working with a stranger).

Many experts agree that it is not a good idea to hire a relative who is inexperienced and/or has a record of poor performance. So if you plan to hire a relative to list your home, consider that practicing real estate can sometimes be difficult even for a seasoned professional, let alone someone who is new to the field and/or is a part-time practitioner.

Believe it or not, the issue of commission is typically secondary when it comes to hiring a relative to list a home. Don’t expect to pay the least amount of commission if you plan to hire “Cousin Jerry” to list your home; he may be directed by his broker on commission negotiation. The fact is that most real estate agents are negotiable when it comes to commissions and you might find a better deal from someone else.

If you’re intent on “keeping it in the family” consider interviewing “Cousin Jerry” as you would any other real estate agent; become familiar with “Cousin Jerry’s” license and experience. Although “Cousin Jerry” may have a real estate license, it may not be in the jurisdiction where your home is located. However, if his license is within the proper jurisdiction- he may not be experienced in the local market.

“Cousin Jerry’s” lack of local market experience could jeopardize your sale by not providing the proper disclosures and understanding the various contracts of sale. Seller disclosures requirements may vary depending which county/city your home is located; even full time agents have a difficult time staying on top of county differences in seller disclosures. Additionally, “Cousin Jerry” should be careful to pay attention local agent etiquette, as potential buyers could be turned away.

If you want to work with “Cousin Jerry” but want to mitigate family interference, a couple of alternatives you might consider include: having “Cousin Jerry” refer you to an experienced local agent for a referral fee (so he is indirectly involved); or, have “Cousin Jerry” work in tandem with an experienced local agent so a professional can act as a buffer from family matters.

This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of July 19, 2010. Using this article without permission is a violation of copyright laws. Copyright © 2010 Dan Krell.

Mortgage oversight agency (FHFA) could stall county greening efforts

by Dan Krell © 2010

Last week, a federal oversight agency raised concerns about a green retrofitting loan program in an effort to protect consumers and the integrity of lending practices. Normally, this would not seem unusual; however on June 6th the Federal Housing Finance Agency (FHFA) issued a statement that affects many Property Assessed Clean Energy (PACE) programs across the country, and may affect Montgomery County’s Home Energy Loan Program (HELP) even before it officially kicks off later this year.

As part of a national initiative to reduce energy consumptions and curb greenhouse gases, PACE (pacenow.org) programs are intended to make green retrofitting affordable for home owners. The program generates funds for the retrofitting through “tax lien oriented financing” by selling “PACE bonds,” and is repaid by the home owner through annual tax assessments.

Enacted through Council Bill 6-09 (April 2009), HELP is Montgomery County’s local green retrofitting loan program, which is part of a first wave of PACE programs implemented throughout the country. Although HELP is awaiting a green light from the County Council to get underway, the county’s Department of Environmental Protection is preparing to manage the program. HELP’s financing arrangement is anticipated to allow a home owner to repay the “loan” over fifteen years through their property tax bill.

As the oversight agency for Fannie Mae, Freddie Mac and the Federal Home Loan Banks, FHFA’s (fhfa.gov) statement cited concerns about “certain energy retrofit lending programs,” specifically referring to local tax assessment loan programs by PACE. “Safety and soundness” concerns were cited because the PACE tax liens could interfere and disrupt a “fragile housing finance market” due to the “absence of robust underwriting standards to protect homeowners and the lack of energy retrofit standards to assist homeowners, appraisers, inspectors and lenders [to] determine the value of retrofit products…”

Although FHFA has collaborated with government agencies, state and local officials to work through their concerns, the issue appears to be unresolved. FHFA’s statement asserts that the tax assessment created through a PACE loan is unlike the typical tax assessment; such that the term and amount of a PACE related tax assessment exceeds a typical local assessment and do not have the usual community benefit that is associated with local tax initiatives. Additionally, the concern over such modifications would “present significant risk to lenders and secondary market entities, may alter valuations for mortgage-backed securities and are not essential for successful programs to spur energy conservation.”

Notwithstanding some critics concerns over the obsolescence of a green retrofit before such a loan is repaid, additional concerns raised by FHFA include: the shift of traditional lending priorities (PACE investors have minimal risk due to the first lien position); PACE program’s collateral based underwriting does not take into account the home owner’s ability to pay; the lack of lending disclosures (such as required by the Truth-in-Lending Act and other consumer protections); “and uncertainty as to whether the home improvements actually produce meaningful reductions in energy consumption.”

It remains to be seen whether HELP will be affected by FHFA’s new guidelines to Fannie Mae and Freddie Mac to deal with PACE loans. However, FHFA stated that the concerns were not raised to undermine programs meant to reduce consumer energy consumption, but rather to encourage the implementation of retrofitting loan programs with “appropriate underwriting guidelines and consumer protection standards.”

This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of July 12, 2010. Using this article without permission is a violation of copyright laws. Copyright © 2010 Dan Krell.

Who's looking out for your interests?

by Dan Krell © 2010


When people buy and sell real estate, they entrust professionals they hire with some of their most sensitive information, at times when they are most vulnerable, with the expectation that the professional act in their best interest. The Maryland Real Estate Commission’s form, “Understanding Whom Real Estate Agents Represent,” reminds consumers that the ultimate responsibility of protecting their interests falls on their shoulders. Although the form itself is used to assist consumers in understanding the duties and loyalties of real estate agents in various forms of agency relationships (e.g., a listing agent’s “duty of loyalty” is to the home seller, a buyer’s agent is expected to negotiate “in the best interests of the [home] buyer,” etc.); the paragraph on page two gives consumers the reminder that to protect their interests, they should read all documents carefully and to seek legal advice from an attorney and financial advice from an accountant.

The consumer reminder might be taken as somewhat of a warning that real estate can sometimes be a dirty business. It is true that most real estate practitioners operate within the law and ethical guidelines, however some do not. It is reasonable to think that recent economic conditions purged the industry of bad elements, think again. Some actions are egregious and are clearly intended to defraud the public; while other actions may appear to be innocuous, but could be construed as deceitful business practices.

Blatant scams are devised every day to appear to be legitimate but have the intention of exploiting the public; recent examples include the rise of foreclosure relief scams across the country. Unfortunately, some of these cons are not always obvious until law enforcement catches up to the perpetrators. Take for example the recent indictment of a Towson, MD title company president who allegedly did not send payoffs to existing mortgage and lien holders and allegedly transferred the funds for his personal use (www.justice.gov/usao/md/Public-Affairs/press_releases/press10a.htm).

Even business tactics that seem harmless, but can have detrimental effects, are sometimes used by real estate agents. One example is overvaluing a home by estate agents just to get a listing. This occurs with the intention to later “convince” the seller to lower the price (the effects of purposefully over pricing a home in a downward market can cost the home seller money). Another example is akin to a “bait and switch:” this agent advertises a fictitious home at such a low price it gets home buyers to call him. When I called on behalf of my client to view the advertised home, the agent told me that the advertisement is for informational purposes only.

Before you hire a real estate professional (including real estate agents) it is always a good idea to check out their licensing credentials, as you can sometimes run across someone who is not licensed; Maryland licensing agencies allow consumers to check a professional’s license status online. Many consumer advocates recommend that before you hire a professional you should interview several and ask for recent client references.

Who are you trusting with your real estate transaction and what are they telling you? The old saying that “if it sounds too good to be true, it probably is” may be true, but it is ultimately up to you to decide. Remember that the ultimate responsibility to protect your interests falls on your shoulders.

This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of July 5, 2010. Using this article without permission is a violation of copyright laws. Copyright © 2010 Dan Krell.

Employment is the key to a stable housing market

by Dan Krell © 2010

The one question that everyone is asking, “where is the housing market headed?” A new focus is needed to stabilize the housing market as the national home buyer tax credit expires (state home buyer tax credit programs, such as California, may continue through the end of the year), and criticism for government foreclosure relief programs increases.

As the national home buyer tax credit sunsets, some in the industry (such as the National Association of Realtors) are scrambling to get a further extension. Proponents of the tax credit point to home sales spikes through the year as evidence of the tax credit’s efficacy. A June 25th NAR press release (realtor.org), described efforts to extend the closing deadline to assist those who could not close by the June 30th target. An amendment to extend the deadline was inserted into H.R. 4213: “American Workers, State, and Business Relief Act of 2010,” which passed both the House and Senate, but still needs to go to conference prior to becoming law.

Doubt remains over the efficacy of the home buyer tax credit; many critics applaud its none too soon conclusion. Putting aside the reports of fraud and abuse by those who have undeservedly filed for the credit, Fannie Mae’s March revised 2010 housing outlook (Economic and Mortgage Market Analysis; March 17, 2010) expressed doubts over continued effectiveness. The report cited various reasons that the most recent tax credit would not be as successful as prior tax credits. June’s Economic and Mortgage Market Analysis (FannieMae.com) reported that the most recent tax credit in fact only temporarily boosted home sales in April. April’s increased sales may have been due to many home buyers seeking to meet the initial qualifier for tax credit (which was to have a contract on a principle residence).

In addition to increasing home sales is the attempt to keep distressed home owners in their homes. Reports criticizing government mortgage modification and relief programs citing a lack luster performance seem to be appearing with increased frequency. Take for example the an April 20th Bloomberg story citing the Special Inspector General for the Troubled Asset Relief Program, Neil Barofsky (“U.S. Treasury's Housing Program Fails to Stem Foreclosures, Watchdog Says”). Mr. Barofsky criticized HAMP (Home Affordable Modification Program) saying it has made very little progress. Additionally, it is estimated that 40% of those helped will eventually default; which could stem from HAMP’s high median debt to income ratios of 61.3% after lowered mortgage payments (FHA guidelines allow for a maximum overall debt to income ratio of 41%).

Since the fourth quarter of 2008, housing indicators have been inconsistent (much like other economic indicators). Even though doubt exists about tax credit and foreclosure relief effectiveness others argue the future of housing may lie with employment and personal earnings.

A recent Florida Realors® study (“The Face of Foreclosure”; floridarealtors.org) points out the correlation between unemployment and foreclosure. The April 6th 2010 press release quoted, Florida Realtors® vice president of public policy, John Sebree, as saying “…In most cases, it was a combination of rising living costs, unemployment or decreased pay, health issues and other factors that caused homeowners to get into trouble. Simple answers and trite political responses just don’t tell the whole story.”

This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of June 28, 2010. Using this article without permission is a violation of copyright laws. Copyright © 2010 Dan Krell.

The fight against mortgage fraud

by Dan Krell © 2010

Last week, the United States Attorney for the District of Maryland, Rod J. Rosenstein announced recent results from local efforts of Operation Stolen Dreams. Coordinated through the Financial Fraud Enforcement Task Force, Operation Stolen Dreams has been described by the Department of Justice as the “largest collective enforcement effort ever brought to bear in confronting mortgage fraud.”

For those who don’t remember, the Financial Fraud Enforcement Task Force (StopFraud.gov) was established in November 2009 by President Obama as an interagency effort to “hold accountable” those who contributed to the recent financial crisis and to prevent a future crisis. Comprised of 20 federal agencies and 94 United States Attorneys’ Offices, as well as state and local authorities, the Task Force is the broadest coalition ever established to combat financial fraud.

The June 17th U.S. Attorney press release was not a final declaration but rather an interim report to make the public aware of the success of recent cases pursuing and prosecuting those who engaged in financial fraud, which includes mortgage fraud, mortgage modification scams, and other activities. Not only has Operation Stolen Dreams succeed in criminally prosecuting 1,215 defendants nationwide, civil enforcement efforts have recovered more than $147 Million.

Recent fruits of the operation include the superseding indictment of a Bethesda man and the conviction of a College Park/Laurel duo. On June 16th, a superseding indictment was issued against a Bethesda man who allegedly used his position as a mortgage originator for a Laurel mortgage company to allegedly participate in a mortgage fraud scheme that defrauded lenders (and others) of over $7.4 Million. The seventeen count superseding indictment chronicled the alleged mortgage fraud activities from 2005 to 2007.

On Jun 10th, a College Park/Laurel duo, were convicted of multiple counts of wire fraud. Testimony recounted how the two, who were employed in the mortgage industry, used straw buyers and stolen identities to purchase properties which almost immediately went into foreclosure- resulting in a loss of $664,493 for a local lender.

In addition to assisting the Financial Fraud Enforcement Task Force in Federal cases, the Maryland Mortgage Fraud Task Force also investigates State and local financial crimes. Among the many cases that have been investigated, some have resulted in the closing of mortgage modification and loss mitigation businesses that allegedly defrauded home owners seeking financial relief.

Recently, a case investigated by the Maryland Mortgage Fraud Task Force resulted in an indictment that was issued against a Montgomery County real estate agent for allegedly defrauding the County. It is alleged that the real estate agent used straw buyers to purchase moderately priced dwelling units (MPDUs are homes that are made available to homebuyers who meet specific requirements to purchase through Montgomery County). Additional allegations include mortgage fraud as well as allegedly violating the MPDU program guidelines by renting out these homes.

U.S. Attorney Rod J. Rosenstein was succinct when he stated, “…Our goals are to punish con artists who have committed mortgage fraud and deter others from following in their footsteps." Mortgage fraud is being pursued as never before. It is without a doubt that federal and local investigations are making an impact on fraudsters and scammers. To assist consumers to protect themselves from fraud, the Financial Fraud Enforcement Task Force website, StopFraud.gov, has many resources; including how to report suspected mortgage fraud.

This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of June 21, 2010. Using this article without permission is a violation of copyright laws. Copyright © 2010 Dan Krell.

Moving day does not have to be stressful

by Dan Krell © 2010.

If it’s not the negotiating, the inspections, the mortgage process that makes you uneasy about the buying/selling process, then it’s the thought of moving. Yes, thoughts of moving and all that may go along with it can make even the most stable person break down.

The two main pieces of advice most professionals offer about moving include planning and organization. Planning your move will keep everything in perspective as you create parameters within which all the activities of your move will be completed. Organizing allows you to keep track of your activities and belongings during your moving period.

Much of the stress that is felt during the move stems from feelings of being overwhelmed by thoughts of everything that must be accomplished during your move. Mitigating the stress and emotion of the move is easier when you have a timeline (of actions and goals) that ends on the day you vacate the home. Having a daily goal will allow you to focus on the task at hand without getting distracted. Each day’s goal can be determined by going into each room noting what needs to be accomplished, including any ancillary activities that need to be completed.

An important aspect of a move is organizing what items are coming with you and what items can be thrown out or donated; this should be easy if you have already de-cluttered your home prior to selling. Staying organized during unpacking can be accomplished by making notes of room destinations for boxes; the notes can be detailed to include whose belongings are in each box as well the contents.

Moving to a new home is not a cheap endeavor; you are sure to spend money on the move even if you’re a do-it-yourselfer. The cost of moving can vary depending on the moving company and services you choose. Doing it yourself is not always the least expensive route; the total cost of a truck rental, packing supplies and your time may compare to the price of a limited service mover. If you’re busy, then you might appreciate a full service moving company that will do all of the packing for you. À la carte moving services may be easier on your pocketbook and also eliminates services you may not need. When shopping for a moving company, make sure they are reputable by checking their credentials and ensuring they are bonded and insured.

Portable storage units have become the “hybrid” of moving because it allows you to do all the work of loading your possessions into a container, but the delivery of the storage unit is carried out by a moving company. The storage unit can either be delivered to your new home or placed in storage until you are ready to unpack.

Moving into a new home is often associated with life events- the good ones and sometimes the not so good ones. Besides having to move, life events have their own challenges; so it’s often helpful to recruit as much help as possible, not just for the physical labor but for the emotional support too.

Although planning and organizing can minimize stress and drama, your plan may need to be flexible to adapt to any unforeseen obstacles; as Robert Burns’ poem To a Mouse testifies: “The best-laid schemes o' mice an 'men…(often go awry).”

This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of June 14, 2010. Using this article without permission is a violation of copyright laws. Copyright © 2010 Dan Krell.

There are two sides to Strategic Default

As Strategic Default gains popularity among home owners; more questions are raised.

by Dan Krell © 2010.

Imagine, if you will, having the ability to separate yourself from your most troubling problem: a burden so great, you cannot sleep at night; a hardship so severe that it interferes not only with daily living, but family relationships; a misfortune so cruel, it causes daily misery.

No, this is not the “Twilight Zone,” but it must be how some home owners feel about owning a home with negative equity (the mortgage balance is higher than the value). The reality is that 41% of home owners recently interviewed for the “Trulia Realty Trac Survey: American Attitudes toward Foreclosure” (May 20, 2010 Truliablog.com) indicated that they would walk away from an upside-down mortgage.

Recently, a home owner confided to me of their regret of missing an opportunity for a strategic default. Now their options are very limited. Although they have been paying their mortgage in a timely manner, their plan was to downsize and then walk away from the larger mortgage.

According to nationally featured Youwalkaway.com (a website that advocates taking “financial control”), there is a distinction to be made between “walking away” and “strategic default”; the distinction is basically about the ability to make the choice. Walking away describes what financially challenged home owners do when they have no other option; whereas strategic default is when a financially sound home stops paying their mortgage because they decided that the consequences of foreclosure is an acceptable part of their long term financial plan.

If strategic default doesn’t appear to be the epitome of self importance in a world reeling from financial abuses, Freddie Mac Executive Vice President Don Bisenius (in a May 3rd Freddie Mac news report; FreddieMac.com) offers another view on the issue. Although he explained that strategic default is a personal choice, it usually does not take into account of externalities (“spill-over” effects). In other words, Mr. Bisenius explains that the person considering strategic default typically has a narrow focus and ignores the consequences of their actions on their neighbors and their community. In addition to becoming an eyesore as well as attracting unintentional animal and human activity, foreclosures have the potential of bringing down home values ultimately costing neighbors and the community financial and emotional capital.

Certainly, the consequences of not paying your mortgage are dire. Among which include: losing your home, negatively affecting your credit, and the possibility of being sued by your lender (state laws differ on deficiency judgments). Clearly anyone would be affected by these consequences; however some believe that the personal long term benefit far outweighs any consequences.

There is the growing ethical and moral debate about strategic default. Although for some home owners, “walking away” is the final chapter of failed attempts at mortgage modification and short sales; while for others, it is a deliberate maneuver to attempt to cut their short term losses in the belief that they are better off in the long run.

Since the long term benefits of strategic default is tied to future events, it may be possible that we may one day determine that the hedging against our homes and communities for a short term personal gain was “short sighted” due to the long term personal and collateral losses; which, in the end may say more about a person than their financial savvy.

This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of June 7, 2010. Using this article without permission is a violation of copyright laws. Copyright © 2010 Dan Krell.

Official Support for Manufactured and Modular Housing

by Dan Krell © 2010

Politicians don’t always vote along party lines. Take for example House Resolution 584, which passed the House of Representatives on vote of 408 to 4 (19 not voting). Timing notwithstanding, the resolution entitled “Recognizing the importance of manufactured and modular housing in the United States,” was overwhelmingly passed in anticipation of National Homeownership Month (which is June); and as of May 25th 2010, recognizes the third week of June as Manufactured and Modular Housing Week.

H. Res. 584 (thomas.loc.gov) recognizes that manufactured and modular housing is not only critical in meeting the housing needs of the country, but it is also a viable industry that employs approximately 70,000 factory and retail employees that generates annual sales of approximately $6Billion. Additional recognition is directed to the use of cutting edge technology and high production standards in the construction of manufactured and modular homes; production facilities adhere to the National Manufactured Housing Construction and Safety Standards Act of 1974, which governs construction, engineering, quality, safety, and systems performance, as well as promoting innovation in safety and efficiency.

According to the Manufactured Housing Institute (factorybuilthousing.com) and the National Modular Housing Council (modularcoucil.org), a manufactured home is built in a controlled environment and then shipped to the site for installation; modular homes are built from components that are fabricated in the controlled environment and then shipped to the home site to be assembled. The MHI includes panelized and pre-cut homes in the definition as manufactured housing. Manufactured and modular homes are built to meet or exceed state and local housing codes, as well as federal Manufactured Home Construction and Safety Standards (also known as “the HUD code”).

The benefits of manufactured and modular housing include affordability, quality, and amenities. Excluding the cost of the land, the MHI estimates that the cost of a manufactured or modular home could be 10% to 35% less than a home built on-site (depending on size and complexity); financing the construction of a manufactured or modular home is less expensive and may even eliminate any interim financing (such as a construction-permanent loan) that is typically required for on-site building.

Due to the fact that manufactured and modular homes are built in a controlled environment (essentially a “factory”), all aspects of quality is constantly and carefully controlled during construction. Unlike on-site construction, where quality inspections are random and inconsistent, manufactured and modular housing fabrication quality specialists constantly monitor fabrication to ensure the final product meets or exceeds all codes. Additionally, the controlled environment protects the materials from weather and almost completely eliminates construction delays.

Amenities and features are no longer absent from manufactured and modular homes. Although these homes are built with standard amenities and features; home buyers can choose options that meet their comfort level as well as meeting their family needs. Additionally, manufactured and modular housing industry proponents tout their high volume purchasing power to lower the cost of home buyer choices of appliances and upgrades.

Manufactured and modular housing is gaining wider acceptance because of affordability and durability. Consider that many national home builders use manufactured components in constructing their larger communities; while some custom home builders use manufactured components or modules to create some of the most luxurious and expansive homes in the area. Who knows; your current or future home may be partially or completely manufactured or modular.

This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of May 31, 2010. Using this article without permission is a violation of copyright laws. Copyright © 2010 Dan Krell.

Shadow inventory dictates direction of housing market

by Dan Krell © 2010

Housing markets are not out of the woods yet. To know where housing is headed, you need to follow the “shadow inventory.” It is estimated that the shadow inventory will be dictating the direction of the housing market for the next twelve to thirty-six months; and contrary to some recent optimistic reports, it could get ugly.

“Shadow inventory,” simply put, is the term used to describe properties that are not yet for sale, but is expected to be listed for sale. The term is loosely used and generally refers to homes that are already owned by banks as well as homes in the process of foreclosure. However, some analysts broaden the scope of the term to also include homes that have seriously delinquent mortgages and/or in the process of a short sale.

Alarms about a threatened housing recovery due to the nationwide shadow inventory have been ringing since early 2010. Although recent reports of increased sales have been undeniably due to home buyer tax credits, economists doubt that any gains in the housing market will carry into July (one qualification for the home buyer tax credit is to close by June 30th). Even Lawrence Yun, Chief Economist for the National Association of Realtors, stated in a May 24th NAR press release (Realtor.org) that although there was an expected increase in existing home sales in April, sales will “temporarily fall back” when the home buyer tax credit expires.

Although it is expected that home buyer demand will diminish in the absence of a home buyer tax credit, a sudden exponential growth of home inventory has the potential to erode not only home buyer confidence but home values as well. It is clear that such an inventory surge can wreak havoc, as evidenced by the foreclosure surge of 2007-2008; but analysts cannot agree on the extent of the problem. Estimates of shadow inventory range from a conservative 1 million units to an astounding 6 million units.

A Standard and Poors analysis published February 16, 2010 (The Shadow Inventory Of Troubled Mortgages Could Undo U.S. Housing Price Gains) made clear the correlation between property liquidation and home value depreciation. And although the reduced number of foreclosures in the past year was due in part to attempts in assisting home owners to keep their homes (through mortgage modification programs), the inevitability of liquidating $473.4 billion in loans (which is equated to 1.75 million homes) was temporarily delayed. It is possible that home prices may again begin to depreciate as these troubled loans are liquidated (standardandpoors.com).

First American Corelogic appears to concur (Home Price Index Report - April 2010) with the premise of the S&P’s report. Although Corelogic’s Loan Performance Home Price Index (HPI) revealed an increase from February 2009 to February 2010, the report states that market stabilization has been widely due to government intervention through foreclosure prevention programs, Federal Reserve purchases of mortgage backed securities, and home buyer tax credits. Due in part to the expected conclusion of Federal Reserve purchases of MBS and home buyer tax credits, the HPI forecast from February 2010 to February 2011 is projecting a decline (corelogic.com).

Housing will undoubtedly be affected by shadow inventory. However, the affects of shadow inventory disposition may largely depend on other economic factors and government intervention; which includes (but is not limited to) employment, interest rates and foreclosure prevention programs.

This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of May 24, 2010. Using this article without permission is a violation of copyright laws. Copyright © 2010 Dan Krell.